Fee competition in the exchange-traded fund business is driving down the cost of investing to new lows.
A simple little ETF strategy I call the Freedom .08 Portfolio proves it. Some previous names for this portfolio included Freedom 0.15 and Freedom 0.11. The numbers are based on the aggregate management expense ratio for the portfolio, which has fallen ever lower through the years. That’s how we get to Freedom .08 in early 2023. That’s 8 cents in fees for every $100 you have invested.
Here’s how the Freedom .08 Portfolio is put together using a 70:30 asset mix of stocks and bonds.:
-30 per cent in the Desjardins Canadian Universe Bond Index ETF (DCU-T): The MER for this fund is 0.08 per cent, which is at the low end for aggregate bond ETFs covering the broad Canadian market for government and corporate bonds. It tracks the Solactive Canadian Bond Universe total return Index, which is a relative newcomer to the Canadian market. You can compare returns to competitors using the bond fund installment of the 2023 Globe and Mail ETF Buyer’s Guide, but they’re very similar to more established indexes.
-30 per cent in the iShares Core S&P/TSX Capped Composite Index ETF (XIC-T): The MER for this fund is 0.06 per cent and the underlying index is the ultimate benchmark for Canadian stocks.
-20 per cent in the Franklin International Equity Index ETF (FLUR-NE): The MER here is 0.1 per cent, which is strikingly low for the international equity category. That’s markets outside North America, by the way. Solactive is again the index provider. In doing your research, compare returns against international equity ETFs tracking the more traditional MSCI EAFE index.
-20 per cent in the Vanguard S&P 500 Index ETF (VFV-T): The MER is 0.09 per cent and the index is one you know and love, the S&P 500.
ETFs trade like stocks, which means you’ll need a digital brokerage account to build a portfolio. For extreme frugal investing, consider the zero-commission brokers Wealthsimple, National Bank Direct Brokerage, and Desjardins Online Investing. CI Direct Trading and Questrade offer ETF purchases at no cost, but you pay the usual commission to sell.
A final point of comparison for the Freedom 0.08 Portfolio is a popular kind of exchange-trade fund called the asset allocation fund. You can buy these fully diversified portfolios with MERs of 0.2 to 0.24 per cent.
— Rob Carrick, personal finance columnist
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Stocks to ponder
Bombardier Inc. (BBD-B-T) The plane maker is generating cash, paying down debt and raising its financial targets. Investors are paying attention, too: The share price has rallied more than 250 per cent over the past eight months. David Berman asks: Has the stock become relevant again?
WELL Health Technologies Corp. (WELL-T) After this health-care company reported record quarterly financial results last week, the share price rallied nearly 16 per cent on high volume. Analysts believe this positive price momentum will continue. The average one-year target price implies a 61 per cent potential gain for the stock. Jennifer Dowty takes a look at the investment case.
The Rundown
Banking woes, Fed keep investors on edge in nervous stock market
Investors are settling in for a long slog in the U.S. stock market in coming months, braced for more tumult in the banking sector and worries over how the Federal Reserve’s tightening will ripple through the economy. As David Randall of Reuters reports, many worry that other nasty surprises are lurking as the rapid series of interest rate hikes the Fed has delivered over the past year dry up cheap money and widen fissures in the economy.
Grocery REITs are a safe harbour in the market storm
Feeling gouged by high grocery prices? Bummed out by bank runs? Sick of stock market volatility? With inflation and rising interest rates creating turmoil in the economy and financial markets, these are tough times to be a consumer – or an investor. John Heinzl is here to offer some help by profiling some real estate investment trusts in the grocery sector. The goal: put some of that grocery money back in your pocket while enabling you to sleep better even as markets gyrate.
Throw caution to the wind with the Free Cash portfolio
It’s time to catch up on the value stock race. Norman Rothery pitted 14 popular measures of value against each other in the U.S. market. Each measure was used to form a tracking portfolio containing the cheapest 10 per cent of the stocks in the S&P 500 index based on that measure. The 14 tracking portfolios were equally weighted and rebalanced annually. So far, the trend favours investors who keep an eye on debt while hunting for bargains.
Canadian bank stocks may not be quite as special as we think
Canadians are used to thinking of bank stocks as a safe, nearly guaranteed way to bet the market. They may want to think again. As Ian McGugan tell us, investors would be wise then to consider the prospect of a future in which Canadian banks no longer churn out market-beating results with clockwork regularity.
Strength in megacap stocks masks broader U.S. market woes
Investors are relying on an old strategy to navigate the current tumult in asset prices: buying shares of the massive U.S. companies that led markets higher for years. Shares of the top five companies by market value — Apple , Microsoft, Alphabet, Amazon and Nvidia — have gained between 4.5% and 12% since March 8, when troubles at Silicon Valley Bank set off banking system worries. In that period, the S&P 500 has fallen 0.5%. Lewis Krauskopf of Reuters tells us more.
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Ask Globe Investor
Question: Harvest Healthcare Leaders has units that trade in U.S. dollars on the TSX. For tax purposes, is the income considered foreign income or Canadian? For example, can donations to registered charities in the U.S. be deducted against the income from HHL.U? – Michael K.
Answer: Only a small amount (9.26 per cent) of the income from this ETF was classified as foreign income in 2022, according to the Harvest Funds website. Most of the distributions (about 94 per cent) are treated as return of capital. So, you won’t get much help here for U.S. charitable contributions.
–Gordon Pape (Send questions to gordonpape@hotmail.com and write Globe Question in the subject line.)
What’s up in the days ahead
Bond markets are suggesting interest rate cuts loom for this summer in both Canada and the U.S. But central bankers are dropping few hints. Who should we believe? Veteran bond fund manager Tom Czitron will provide some insight.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
